World Leaders Agree on a New Global Corporation Tax System to Adjust to the Digitalization of the Economy.
To tackle the digitalisation of the economy and the corporate tax avoidance, the Organization for Economic Co-operation and Development (OECD) has designed a two-pillar framework under which global companies must:
- Reallocate part of their revenue to countries where they derived this revenue f rom,
- Pay a minimum tax of 15% where they’re doing business.
More than 130 countries and jurisdictions have agreed to implement the new framework.
Governments levy a tax to raise the revenue that is needed to absorb the cost of its operations. But compliance to the tax law is generally voluntary and taxpayers are allowed to use all legal means to minimize their tax bill. Some taxpayers can plan their tax internationally. That makes monitoring compliance more challenging.
The Organization for Economic Cooperation and Development (OECD) has estimated that corporate tax avoidance costs countries between $100 and $240 billion annually. In the United States, for instance, the Government Accountability Office (GAO) studies have shown that most U.S. corporations pay little to no federal income tax.
To learn more, please review Mathieu Aimlon’s article in the January 2022 issue of the TaxStringer, the e-tax publication of the New York State Society of Certified Public Accountants (NYSSCPA). The TaxStringer contains original, technical articles and commentaries on several tax topics written by experts in their field or noteworthy specialists in tax.
The NYSSCPA is a 125-year-old institution that serves as an advocate and resource for Certified Public Accountants. It has more than 21,000 members including CPAs, lawyers, bankers, and other professionals f rom associated industries.